1) A premium on common stock:
A.Occurs when a corporation sells its stock for more than par or stated value.
B.Is the difference between par value and issue price when the amount paid is below
par.
C.Represents profit from issuing stock.
D.Represents capital gain on sale of stock.
E.Is prohibited in most states.
2) A company entered into the following transactions. For each transaction, indicate the
appropriate journal in which it should be recorded.
a. Sales Journal
b. Purchases Journal
c. Cash Receipts Journal
d. Cash Disbursements Journal
e. General Journal
____ 1> Purchased merchandise on credit.
____ 2> Sold merchandise on credit.
____ 3> Purchased merchandise for cash.
____ 4> Sold merchandise for cash.
____ 5> Paid cash to settle the utility bill.
____ 6> Owner invested more cash in the business.
____ 7> Recorded depreciation for the period.
____ 8> Borrowed cash from the bank.
____ 9> Bought office supplies on credit.
____ 10> Received cash from a customer to settle an account receivable.
3) Alfarsi Industries uses the net present value method to make investment decisions
and requires a 15% annual return on all investments. The company is considering two
different investments. Each require an initial investment of $15,000 and will produce
cash flows as follows:
The present value factors of $1 each year at 15% are:
10.8696
20.7561
30.6575
The present value of an annuity of $1 for 3 years at 15% is 2.2832
The net present value of Investment B is:
A.$780.
B.$(15,780).
C.$9,000.
D.$39,797.
E.$(5,918).
4) A company had a beginning balance in retained earnings of $430,000. It had net
income of $60,000 and paid out cash dividends of $56,250 in the current period. The
ending balance in retained earnings equals:
A.$546,250.
B.$426,250.
C.$116,250.
D.$433,750.
E.$490,000.
5) On September 15, SkateWorld borrowed $70,000 cash from Mutual Bank by signing
a 6%, 60-day note payable.
a. Prepare SkateWorld’s journal entry to record the issuance of the note payable.
b. Prepare SkaetWorld’s journal entry to record the payment of the note at maturity.
6) The cost of workers who assist in or supervise the manufacturing process, not linked
to specific units of product is called:
A.Unspecified labor.
B.Direct labor.
C.Indirect labor.
D.Basic labor.
E.Joint labor.
7) Information to prepare the statement of cash flows usually comes from (a)
comparative balance sheets, (b) current income statement, and (c) additional
information.
8) The following table of cost information is available for the Renaldo Company for the
month of November:
Based on the table of cost information above, prepare the general journal entry required
to record the:
a. Transfer of goods from the molding department to the finished goods inventory.
b. Cost of goods sold for November.
9) Portia Grant is an employee who is paid monthly. For the month of January of the
current year, she earned a total of $8,260. The FICA tax for social security is 6.2% and
the FICA tax rate for Medicare is 1.45%. The FUTA tax rate of .6% and the SUTA tax
rate of 5.4% are applied to the first $7,000 of an employee’s pay. The amount of federal
income tax withheld from her earnings was $1,325.17. Her net pay for the month is:
A.$6,422.71
B.$6,246.94
C.$6,302.94
D.$5,868.94
E.$6,422.71
10) Following is a partial process cost summary for Mitchell Manufacturing’s Canning
Department.
If the units completed were transferred to the Labeling Department, what is the
appropriate journal entry to transfer the direct materials?
A.Work in Process—Labeling $135,500; Work in Process—Canning $135,500.
B.Work in Process—Labeling $176,500; Work in Process—Canning $176,500.
C.Finished Goods—Labeling $135,500; Finished Goods—Canning $135,500.
D.Work in Process—Labeling $176,500; Finished Goods—Canning $176,500.
E.Finished Goods $136,000; Work in Process $136,000.
11) A machine with a cost of $130,000, accumulated depreciation of $85,000, and
current year depreciation expense of $17,000 is sold for $40,000 cash. The amount that
should be reported as a source of cash under cash flows from investing activities is:
A.$45,000.
B.$5,000.
C.$17,000.
D.$28,000.
E.$40,000.
12) Fletcher Company collected the following data regarding production of one of its
products. Compute the variable overhead spending variance.
A.$25,450 favorable.
B.$4,000 favorable.
C.$4,000 unfavorable.
D.$21,450 favorable.
E.$21,450 unfavorable.
13) Gordon Corporation inadvertently produced 10,000 defective digital watches. The
watches cost $8 each to produce. A salvage company will purchase the defective units
as they are for $3 each. Gordon’s production manager reports that the defects can be
corrected for $5 per unit, enabling them to be sold at their regular market price of
$12.50. Gordon should:
A.Sell the watches for $3 per unit.
B.Correct the defects and sell the watches at the regular price.
C.Sell the watches as they are because repairing them will cause their total cost to
exceed their selling price.
D.Sell 5,000 watches to the salvage company and repair the remainder.
E.Throw the watches away.
14) Jones Corp. reported current assets of $193,000 and current liabilities of $137,000
on its most recent balance sheet. The working capital is:
A.141%.
B.71%.
C.($56,000).
D.$56,000.
E.41%.
15) Describe the information found on a responsibility accounting performance report.
16) A common focus of financial statement users in evaluating a company’s
performance and financial condition includes evaluating its (1) __________________,
(2) ______________, and (3) ___________________.
17) Match the following terms with the definitions.
18) Use the following information about the calendar-year cash flows of Park Company
to prepare a statement of cash flows (direct method) and a schedule of noncash
investing and financing activities.
19) For each of the following items, indicate whether it would be classified as either an
(O) operating activity, an (I) investing activity, a (F) financial activity, or a significant
(N) noncash financing and investing activity.
__________ (1) Cash sales of merchandise.
__________ (2) Sale of land for cash.
__________ (3) Signed a note payable in exchange for cash.
__________ (4) Purchased supplies for cash.
__________ (5) Paid cash to settle an account payable.
__________ (6) Purchased a warehouse in exchange for shares of its stock.
__________ (7) Paid interest on a note payable.
__________ (8) Reissued treasury stock.
__________ (9) Purchased equipment for cash.
_________ (10) Purchased equipment in exchange for a 6-month note payable.